Golden Harvest's unused right share fund under BSEC scanner

The Bangladesh Securities and Exchange Commission (BSEC) has formed an inspection team against Golden Harvest Agro Industries Limited — one of the country's leading frozen food and ice cream sellers— to review the utilisation proceeds of the right shares raised in 2019.

Even after four years of raising nearly Tk90 crore through issuing the right shares, the company failed to deploy the whole fund.

In the three-member inspection team, BSEC Additional Director Molla Md Miraz Us Sunnah is the team leader while Deputy Director Mohammad Asif Iqbal and Assistant Director Md Mehedi Hasan Rony are the team members.

The inspection team will go over the whole right shares' utilisation proceeds of the company according to the management's declaration. It will also check the related party transaction since the company listing.

The inspection team has been asked to review and submit the report to the commission within 30 working days.

Back in 2019, the company raised the fund by issuing 8.99 crore right shares for business expansion. It offered right shares at a ratio of three right shares for the existing four shares at a face value of Tk10 each.

However, till January this year, the company was able to use Tk70 crore of the fund. The remaining amount has still not been utilised.

An official of the company, seeking anonymity, acknowledged the firm's receiving a letter from the regulator. In the letter, the commission sought related documents which were sent to it, he said.

Requesting a time extension to use the fund, Golden Harvest has already applied to the BSEC, the decision of which has remained pending, the official said.

Earlier an official at Golden Harvest said the main reason behind the delay was the Covid-19 pandemic, adding that a big portion has already been used though.

Also, the company faced difficulties in opening letters of credit (LCs) for machinery acquisition because of the dollar crisis and other economic uncertainties, he added.

Now, the company has sought more time to use the rest of the amount for opening an LC for machinery, the official further said.

According to BSEC sources, the firm had used funds from Braintrain Studio Ltd, which is Golden Harvest's own company, and provided excessive advances for its infrastructure development.

Also, the commission found that the same person holds the post of managing director at both Golden Harvest and Braintrain Studio.

That means, the payment between the companies is known as a related party transaction, which is permissible only upon approval by investors, the BSEC sources said. However, the company made the transaction without following the due process, they said.

Business ups and downs

Before its stock market listing in 2013, the company had shown promising business.

In June 2011, its revenue stood at Tk52.65 crore, and net profit after tax was Tk13.23 crore, which was the best year for Golden Harvest's business.

Then in 2018, the company filed for issuing the right shares to expand its business, and it secured the BSEC approval in October 2019. However, after receiving the right share fund, its revenue and net profit declined.

In fiscal years 2020-21 and 2021-22, the company's revenue dropped significantly and it incurred huge losses. As a result, the general investors were deprived of their expected returns from the company.

In the July-December period of 2023, the company's revenue stood at Tk53.62 crore, which was Tk48.06 crore in the same period of the previous year.

Its finance cost stood at Tk8.23 crore, and its net loss stood at Tk3.14 crore in the July-December period of 2023.

In the last fiscal year, the company recommended a 1% cash dividend for its shareholders.

Golden Harvest's shares closed at Tk18 each at the Dhaka Stock Exchange today.